Maryland Auto Dealer Bonds
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Maryland auto dealer bond needs.
What Are They?
Maryland auto dealer bonds play an important role in Maryland’s auto trading industry. In purchasing an auto dealer bond, a dealer pledges to comply with all applicable laws and regulations and to compensate those harmed financially by the dealer’s unlawful or unethical business practices.
Who Needs Them?
The Maryland Department of Transportation, Motor Vehicle Administration (MVA) issues 13 different types of auto dealer licenses, and some dealers may need more than one type of license. Purchasing a Maryland auto dealer bond is a requirement for obtaining any of them.
The required bond amount varies depending on whether the dealer sells new or used vehicles and on the previous year’s sales volume. For dealers selling only new vehicles, the required bond amount starts at $50,000 and increases in $25,000 increments up to a maximum of $300,000 for those selling in excess of 2,500 vehicles in the previous year. For dealers selling used vehicles, the required bond amount starts at $15,000 and increases incrementally to a maximum of $150,000 when the previous year’s sales volume exceeds 2,500 vehicles.
Maryland auto dealer licenses and auto dealer bonds both have a two-year term. Failing to maintain an active bond in force at all times can result in license revocation.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Every Maryland auto dealer bond is a legally binding contract among three entities referred to in the surety bond agreement as the obligee, the principal, and the surety.
- The obligee, MVA, is the party requiring the bond.
- The principal, the dealer, is the party required to purchase the bond.
- The surety is the company guaranteeing the bond.
Two important things to note: 1) the terms of the surety bond agreement legally obligate the principal to pay all valid claims against the bond, and 2) the surety guarantees the payment of claims.
Consequently, when a valid claim is filed for damages caused by the principal’s failure to comply with the laws governing vehicle sales, the surety will pay it initially. But that payment is made on behalf of the principal and does not let the principal off the hook. The principal is now obligated to repay the surety for the debt created by the surety’s payment of the claim.
What Do They Cost?
Two variables go into calculating the annual premium rate for a Maryland auto dealer bond: the bond amount and the premium rate. The surety determines the premium rate for each bond applicant based largely on the individual’s creditworthiness as measured by their personal credit score. The primary underwriting concern is whether the principal will repay the surety for claims paid on the principal’s behalf.
A high personal credit score is associated with a low risk of non-repayment and typically results in a low premium rate. A low credit score, however, is reason to think that the principal might not be as willing and able to reimburse the surety, resulting in a substantially higher premium rate. Depending on the perceived risk level, the premium rate for a Maryland auto dealer bond can be anywhere from less than one percent to about three percent.
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Our surety bond professionals will get you the Maryland auto dealer bond you need at a competitive rate.